Stock market may face trouble spots

NEW YORK -- After two of the most gut-wrenching weeks in recent Wall Street history, investors are anxious to know when the stock market is going to turn around and move higher.

Given the current state of the economy, in which corporate layoffs and restructuring have replaced the rapid expansions of recent years, a comeback isn't quite so simple. The market is likely to face more vulnerable times.

''I'm not holding out hope any time soon'' for a turnaround, said Gary Kaltbaum, a market technician for First Union Securities. He said stocks still are overvalued and that investors will be grappling with earnings disappointments all year.

''The Dow stocks are just now playing catch up. The voracity of selling leads me to believe that any rally will also be sellable,'' Kaltbaum said.

Kaltbaum was referring to the Dow Jones industrials' two-week slide that sent the blue chips into bear market territory -- represented by a 20 percent decline from the index's Jan. 14, 2000, closing high of 11,722.98 -- during Thursday's trading. The Dow closed Friday at 9,504.78, down 1,139.84, or 10.7 percent, during the previous two weeks and 18.9 percent off its peak.

The Dow fell victim to the same investor fury that sent the Nasdaq composite index plunging more than 60 percent from its high of 5,048.62 of a year ago.

Market watchers are split about when a rebound could occur.

''The market is the best forecaster of the future,'' said Kaltbaum, who believes that the stock market is predicting a recession.

Other analysts forecast a recovery soon, and point to recent trading sessions in which volume has been heavy and selling has been widespread across sectors, which in the past has often signaled that the market was about to touch bottom.

''Certainly, the dumping of stocks has become indiscriminate and the general mood of the market, because of the persistent unrelenting selling is extremely gloomy,'' said Alfred E. Goldman, director of market analysis for A.G. Edwards & Sons Inc. in St. Louis. ''It means we are closer to a bottom.''

Other analysts concur.

''We are getting very close'' to bottoming out, said Brian Belski, chief fundamental market strategist for U.S. Bancorp Piper Jaffray.

Analysts agree on two things:

n The market must wait to see whether companies' upcoming warnings of disappointing first-quarter earnings have been factored into beaten-down stock prices. If results are worse than investors' already lowered expectations, stocks will continue downward.

The Fed must ''restore a sense of confidence to the business community, as well as the stock market, that they do recognize that equities are under pressure,'' said Alan Ackerman, executive vice president of Fahnestock & Co.

One thing the market has going for it, oddly, is that upcoming economic data, such as consumer confidence and unemployment figures, are likely to be quite weak.

Such news would be viewed as positive if it prompts the Fed to lower interest rates for the fourth time this year.

''The good news for the stock market is that over the next 30 days, the macroeconomic data is going to look as bad as the earnings data has for months,'' said Robert J. Barbera, chief economist at Hoenig & Co. of Rye Brook, N.Y.